tv Nightly Business Report PBS September 28, 2012 7:00pm-7:30pm EDT
captioning sponsored by wpbt >> this is n.b.r. >> tom: good evening. i'm tom hudson. susie has the night off. there's almost $3 trillion in u.s. mutual fund money markets. regulators want to make them safer. the third quarter ends for investors. it's been a good quarter and it could get better if history is any guide. then the c.e.o. of platinum miner stillwater mining joins us. global demand and why platinum is cheaper than gold. that and more tonight on n.b.r.! an unusually public battle over money market regulation begins our broadcast time. the debate is testing the regulatory structure put in place by the dodd-frank financial reforms after the credit crisis. under pressure from treasury
secretary timothy geithner, the new financial stability oversight council is making a strong push for controversial rules aimed at preventing a run on what many think of as a safer place for investors to put their money. darren gersh explains. >> reporter: for an investment designed to be as boring as possible, money market funds have set off a fierce regulatory battle. last month, the s.e.c. deadlocked over new rules to strengthen money market fund regulation. today, the new financial stability oversight council headed by the us treasury said it is preparing to act to protect the economy. >> if investors get any sense that there might be a failure, they'll all race for the exit. and that's the equivalent of a run on the bank and there is no one there-- no one like a parent with capital or the fdic to supply capital if there's that kind of race for the exit. >> reporter: three options are on the table. instead of a fixed value of $1, money market funds could be required to use a floating value. regulators are also considering whether money market fund companies should hold some of their assets as a buffer against
a surge in withdrawals or whether to require investors to wait before they can get back a portion of their money. the s.e.c. could try again to pass new rules, but if it doesn't, the stability council could decide some big money market funds need closer regulation. that idea worries fund companies. >> it would result in significantly more costs and regulation and who would want to invest in a fund that the federal government has designated as systemically important? >> reporter: new rules may also push cash into unregulated investments or bank accounts. >> and putting even more money into the banking system and more burdens onto its insurance system seems to me the opposite direction from the way we want to be going when we are trying to solve the too big to fail problem. >> reporter: during the financial crisis, the treasury was forced to guarantee money market funds, a risk it doesn't want to take again. darren gersh, "nightly business report," washington. >> tom: u.s. stocks ended their best quarter today since 2010, despite some weakness today.
investors locked in profits today after another set of disappointing economic data. a measure of business activity in the midwest fell to 49.7 in septmber from 53 in august, the first such contraction in three years. and a national gauge of consumer sentiment slipped to 78.3, after registering 79.2 earlier in the month. meanwhile, spain's banks got a passing grade on its stress tests, but that wasn't enough to put wall street's european worries to rest. the dow lost nearly 49 points the nasdaq dropped 20 and the s&p fell six. >> tom: still, a wave of central bank actions across the globe pushed the major stock averages to solid gains in the third quarter. in the past three months, the dow rose more than four percent. the nasdaq and s&p 500 both tacked on about 6% powered higher in part by apple's big run-up. the quarterly rally comes despite september's reputation and strong challenges for
stocks. suzanne pratt has more. >> reporter: september was supposed bad news for the stock market. after all, that's been true most of the time for several decades. this year, however, the september swoon did not come. instead all of the major averages gained ground in the month. market pros credit aggressive stimulus plans from the federal reserve and other central banks for the sweet performance in stocks. but, some worry trouble is coming. >> the market has had a nice move in the last few weeks, i wouldn't be surprised if we see a little bit more of a sideways or a consolidated market as we enter in the fourth quarter here. >> reporter: that's because there are concerns about a mediocre earnings season, as the third quarter comes to an end this sunday. alcoa will kick it off when its profit report is released october 9. other headaches for stock investors include, europe's
financial crisis as well as whether china will do more to rev up its economy. and, then there are the risks associated with america's so- called fiscal cliff. >> i think markets are going to become increasingly focused on that after the election and there's still a lot of uncertainty about how that's ultimately going to play out. >> reporter: historically, october has been a rather ho-hum month for stocks, despite the market crashes that have come during the month in a few years. and, curiously, october has proven an excellent time to buy stocks in the past. suzanne pratt, "n.b.r.," new york. >> i'm erika miller in new york. still ahead, i'll show you the hottest toys your kids may be asking for this holiday season.
>> it's been four years since bank of america bought merrill lynch. today, b of a agreed to bay $2.4 billion to settle an investor lawsuit. shareholders claimed bank of america hit facts of the buyouts such as losses of merrill lynch and billions of dollars in bonuses. they settled to eliminate the uncertainty, burden, and expense of further litigation." this doesn't end legal problems for bank of america. it still faces lawsuit for mortgages of countrywide which they bought. >> they will say, this is a huge settlement by all standards and what about other settlements. are they going to be so anxious to get rid of them that they'll
settle out for big numbers and you can only do some of the settlement. >> the settlement will be covered by money bank of america has set aside and there's an additional $1.9 billion in charges coming. leading the third quarter charges of will 3.5 billion, and that could mean the bank reports a loss for the quarter. also in banking today, a top british regulator thinks the bank to bank interest rate system known as libor can be fixed. libor interest rates are used as benchmarks for trillions of dollars in loans, including auto loans and home equity lines. at least a dozen banks are under investigation for possibly manipulating the rates. among the recommendations from the u.k. regulator: direct government oversight of officials in charge of setting the rates. >> tom: this week we've been taking you to trading pits from new york to chicago hearing what traders say about the upcoming presidential election. tonight, it's the livestock futures pit in chicago. here's diane eastabrook.
>> reporter: the summer drought has unleashed a bear market for livestock. cattle and hog prices have tanked as farmers slaughter herds to avoid high feed prices. >> we certainly need a rally. >> reporter: livestock trader tres knippa has been keeping a closer eye on cattle prices than on the presidential election. knippa doesn't see huge policy changes coming out of washington from either candidate and he's not sure that's such a bad thing. >> often times the economy and the market doesn't want a big change-- just everybody leave things where they are, figure out what the rules are and move forward. farm policy and agriculture policy may fall into just that. we're not going to see any big changes in the next two, four years so we have a framework to operate from there. >> reporter: as a livestock trader do you have any concern about bush tax cuts not being extended or the debt not being addressed? >> well from just a clear procedural standpoint if romney gets elected he takes over in january the bush tax cuts they're dead. so, now we just have to build
that into our model and say that's not going to change. so if obama gets elected they stay in. if romeny gets elected which he won't then he can't necessarily change it so let's just build that those tax cuts are gonna expire at the end of the year period. the one thing that i can tell you that is very troublesome to me as i look at prices, as i look across as i look at hog prices priced for next summer, i look at cattle prices, i look at grain prices and that is that why is it that we ignore the food and energy component of cpi? so, i could be ben bernanke's speech writer because he says the same thing every time he goes in front of the senate is we don't see any particular problem with inflation. really, we don't corn prices just nearly double in three months. so, how is it there is no inflation? >> reporter: do you get any sense that the ethanol mandate is going to change under either administration under obama or if romney would get elected? >> well is sure seems like the
word ethanol has turned into a pejorative and it's not exactly the most positive topic. i just don't know that turning food into gasoline is necessarily what we want to be doing in the long term. >> reporter: and it affects this market? >> you bet it does. as corn prices go up cattle prices go up. simple as that. that's an input cost to feeding cattle is corn, so you've got to take cattle prices higher to offset that. >> reporter: thanks very much. >> you bet. >> tom: a quiet ending to the third quarter for stocks the major indices falling. the s&p 500 spent the entire session in negative territory.
it made three failed attempts to get to unchanged before closing down a half percent. trading volume picked up to end the quarter. 830 million shares on the big board. just under 1.9 billion on the nasdaq. nine of the ten major stock sectors were lower today. telecommunications fell 0.8%. technology dropped 0.7% and materials fell 0.6% of a percent. for the week all three indices lost ground. the dow fell 1.1% this week. the nasdaq shed 2%. the s&p 500 lost 1.3%. nine of the ten major stock sectors also were also up for the quarter. the quarterly winners included the energy sector up 9.5% even as oil prices have cooled in recent weeks. the consumer discretionary sector was up 7.1% for the quarter. and tech stocks did nicely up 7%. one of the quarter's bright spots was apple. today, c.e.o. tim cook did
something rare for apple. he apologized for problems with a product. apple's new maps service has received a lot of criticism and cook admitted the company fell short. shares were down with the broad market. apple dropped 2.1%. volume was heavier than usual. but the stock had a blistering rally this quarter up 17%. shares hit an all-time high earlier this month. one of the companies locked in battle with apple is research in motion. and thanks to better than expected quarterly results last night, shares were very active today. more than 139 million shares traded with the stock gaining 5%. the blackberry maker lost less money than feared in its latest quarter and stuck with its pledge to introduce its newest blackberry device in the first quarter of next year. facebook is known to promote businesses, but now it's taken a step toward capturing some e- commerce. it launched a new service for users to buy and send real gifts
called facebook gifts. the presents are from certain vendors, purchased through facebook. shares rallied 6.6%. volume was heavier than usual. while display advertising remains facebook's main source of revenue and the company has been focused on its mobile strategy, analysts say this new e-commerce feature could help diversify facebook's revenue sources. drugstore giant walgreen saw its latest quarterly profits fall from a year ago, hurt by it losing the prescription business of express scripts. same store prescription sales got hit, falling almost 13%. it has since resigned express scripts as a pharmacy benefits customer. shares only moved a fraction, but volume was heavy and the stock hit a new 52 week high during the trading session. four of the five most active traded exchange traded products were lower. the s&p 500 volatility note, which usually moves in the opposite director of the index was up 3.1%. and that's tonight's market focus.
>> tom: the good times for stock investors should continue through the end of the year if history is any guide. sam stovall is the chief equity strategist at s&p capital i.q. happy end of the third quarter to you, sir, nice to see you again. >> and to you, as well, tom. >> tom: up more than 8% this quarter, more than 14% year to date. been a blistering rally for the s & p 500. more to come, you think. why? >> well i think certainly it's a possibility. we're coming to the latter part of an election year. and typically, no matter who
gets elected, now that the uncertainty has run its course, investors tend to breathe a sigh of relief. going back to 1900, the average gain is a little more than 2.5% but more important is the frequency with which the market rises and that's about 75% with a majority of the full year peaks occurring in the final quarter of the year. >> tom: so pretty good odds to argue for that we haven't seen the highs this year. what about the fescal cliff? that big psychological and real threat to the economy and to investors that still is out there? >> well, it's almost like an olympic hurdler who sees all of these hurdles ahead of them, and i guess they're happy once they get over each successful one. once we get past the election, once we get past the third quarter earnings reporting seasons, then certainly we do have to worry about the fescal cliff. but i would tend to say that most people are expecting that
there will be some sort of a last-minute compromise or at least delay in the sequestration that is expected to kick in on january 1. >> tom: meantime, the environment out there, we sought latest g.d.p. revision yesterday, a slower economy faster than expected. corporate earnings also slowing down. that's happening regardless of what's going on in the political environment. >> it certainly is. earlier this summer, what was really driving stock prices, in my person was two words-- anticipated stimulus. notice, it's removal of uncertainty, and so i think the real question is will we be seeing a trough in corporate earnings in the third quarter, a trough in u.s. g.d.p., in this or the fourth quarter of the year? or might we be seeing troughing a little bit later on for other international g.d.p.s. in general, i think a lot of people are anticipating that maybe the worst will soon be behind us, especially because of all this liquidity that's been
pumped into the system over the past several months. >> tom: you've crunched numbers and brought some sectors to watch for next three months, including the technology area here with xlk, being the e.t.f. for the technology sector. has had a nice rally over the last 12 months. what could it higher? >> it certainly has. we think we will be seeing an improvement in earnings expectation, not only for this third quarter that's coming up but also as we head into 2013. right now the bar is set pretty high with a nearly 12% increase for the s & p 500 but technology is expected to best that bar, and so even if we do get revised lower, we still believe that it's likely to be an out-performer. >> tom: you're also watching materials. and in the age of questions around china's economy, why materials in this regard? >> materials tend to be among the better performers in the fourth quarter, going back to 1990, possibly because of
increased cyclical focus, all 10 sectors in the s & p posted average increases in want fourth quarter with the cyclical ones being better performers. i would be temped to say i might be a little worried about the materials because it's one of the more internationally exposed sectors gloment previous sectors to watch for th past quarter you mentioned in late june, consumer discretionary up, sames will at three, and technology up seven. do you still like these? >> we still have wait recommendation and brought down sames to market weight. >> tom: do you have any positions in these funds, sam? >> i do not. >> tom: look ahead to the quarter ahead, it's soviet, next week on "n.b.r.": we're focusing on one of the keys for getting people back to work, job retraining. on monday, electronic health records, a look at how technology is making it easier
for doctors to see patients outside the office. at the intersection of auto sales and investor demand for precious metals sits stillwater mining. the company digs platinum and palladium out of the ground, most of it destined for automotive catayltic converters. we spoke with stillwater's chairman and c.e.o. frank mcallister asking first about global demand. >> platinum and palladium demand is sort of in a deficit. you do have supply. you would say, well, maybe we're not producing enough. these are very difficult metals to produce. the supply constraint is such that you can't just kick new production on. as i say, it comes out of south africa. it comes out of russia, and our mine in montana. so the two metals are used primarily for the same product. and that is catalytic converters in cars. you have kind of a surging market for cars. you have the regulatory requirements stepping up in the cars.
and you've got sort of this price-driven move from platinum to palladium, so the madeium is getting the bigger market in the cars than platinum has had in the past. so essentially the demand is really quite strong. >> tom: frank, with that cupid of demand outlook for platinum, how do you explain the price differential between gold and platinum. traditionally, as you are well aware, gold is priced per ounce below platinum but right now gold is about $100 above platinum. >> people are looking forward and saying they want something with real value and price the gold up. based upon not demand from the standpoint of industrial demand, but demand from investor demand. that will continue for some time in the future. we could see much higher prices of gold, quite frankly, going forward. the platinum is more driven, not by investor demand by industry demand. >> tom: i do want to ask you about your exposure with stillwater mining. how leveraged are you to the
price of platinum and palladium? how are youable to take advantage of price increases if you are as optimistic as you seem in. >> we produce about three ounces of palladium to each ounce of platinum. we produced about 500,000 ounces of primary production out of the mines on an annual basis. from a standpoint of our refinery, we recycle not quite that much platinum and palladium, and that's a different mix. that would be about 60% palladium, and about 40% platinum. there is some irrhodium in that as well that comes out of the catalytic converters. our primary products are platinum and palladium. if the price of platinum goes up $1 we produce about 150,000 ounces and that would be $150,000 to our top line immediately, just as soon as that dollar goes up. same thing with palladium. but if the palladium price goes up a dollar, i kind of get three times that. i got 350,000 ounces of palladium, so i'd get $350,000
of additional revenue. most of that would go right through the bottom line. we do have some fees and there are some taxes we have to pay but for the most part that goes right down through to the pretax line. >> tom: a look at platinum and palladium from the minor himself, frank mcallister, c.e.o. of stillwater mining. >> thank you very much, tom. >> tom: most of us probably are just starting to think about halloween. but for toymakers, the holiday season countdown already is underway. it's a fierce fight every season, battling for attention and profits in an increasingly crowded field. erika miller was on the case today, checking out the players and their play-things at a toy fair in new york. >> reporter: there's a new nerf blaster. and these monster high goth dolls. who could miss this w.w.e. brawlin' buddies plush toy. just a few of the many competitors for the it toy of the year. mattel is hoping it will be this barbie doll with the ultimate graphic tee. >> test test this is a test. what we love about it is it's a match up between a video camera, which girls love and understand
how to play with, th w everything is working. e've merged it with fashion play. >> reporter: hasbro is bringing back furby with a personality that changes over time. >> if you shake it a lot, if you... if you handle it in a fun way, it can be very mischievous. if you are very sweet, if you pet it, it can develop a very sweet personality. >> reporter: there are always hot toys that sell out every year. but overall, toy sales are expected to be lackluster this holiday season and not just because of the weak economy. >> the macroenvironment has typically not been that big a deal. even if you look at the worst years of the economy over the past 40 years, the toy industry holds up pretty well. and some of the weakest years for the toy industry have actually been in a good economy. >> reporter: mcgowan says the biggest headwind for the toy industry is the growing popularity of video games and tablets. as a result, many manufacturers have developed toys that interact with ipad apps. but leapfrog says the success of the ipad is actually boosting sales of its leap pad tablets for kids. >> kids love to copy what their parents are doing.
so, when their parent pulls out their adult tablet, the kid looks at it and says i want to play with that. so therefore the adult then says, i'm going to buy you your own tablet. >> reporter: for the toy industry, a lot is riding on the success of the holiday season. many toy manufacturers get 35% or more of annual revenues in the 4th quarter and an even bigger percentage of profits. erika miller, "n.b.r.," new york. >> tom: finally tonight, running a business and investing is a lot of numbers and statistics. but a good story is necessary to make any data meaningful. lou's been thinking about telling stories. here's author and educator lou heckler. >> i now get paid for what i used to get punished for-- telling stories! in my more than 30 years as a professional speaker and educator, i can say without fear that much of what we learn we learn through stories. the best bosses i have worked for, the best bosses i have interviewed over the years all tell stories. balancing hard, cold facts with
stories satisfies both sides of our brains. the left side-- our judge and jury and number cruncher. and our right side-- our poet and comedian and artist. a good story does three things: it helps us recall the past, it helps us understand the present, and if it teaches a lesson, as most good stories do, it allows us to have some idea of what the future may hold. even a story you have heard or read before may have a new meaning for you today. it's why we go back to texts, religious and otherwise, that have meaning for us. if you manage others, i hope you use stories to inspire, to set limits, maybe just to put a light touch on things from time to time. we all like stories. i'm lou heckler. >> tom: that's "nightly business report" for friday, september 28. good night, everyone and have a great weekend. we'll see you online at nbr.com and back here monday night. captioning sponsored by wpbt